Los Angeles Metro Ranks Second Nationally for Medical Office Leasing Amid High Demand

The Los Angeles metro area, encompassing Orange County, secured the second-highest national ranking for healthcare leasing activity in the second quarter, according to Avison Young. The region recorded 331,000 square feet of medical office leasing in Q2, contributing to over 1.5 million square feet in the past year. Los Angeles also led all markets in healthcare sales, with $285 million in transaction volume. This robust activity is fueled by an aging population and the presence of major health systems like Cedars-Sinai and UCLA Health.

Elevated construction costs and higher interest rates have shifted developer focus from new construction to converting older office and retail properties into medical space. With nearly 61 million square feet of medical office inventory and a 93 percent occupancy rate, only 1.2 million square feet are currently in the pipeline, leading to tight supply and rising rental rates. The expansion of outpatient services, supported by Medicare and Medicaid reimbursement policies, further drives demand for non-hospital settings. This trend is expected to continue, with demand limited primarily by available inventory. Developers and investors should note the strong demand for medical office space in the Los Angeles metro, particularly opportunities in converting existing properties due to high construction costs for new builds.